According to a 2017 MarketWatch report, half of American households live paycheck to paycheck. Contrary to popular belief, being smart with your money doesn’t equate to having thousands in the bank or having a portfolio of high-risk investments. Instead, being smart with money starts with proper budgeting and setting realistic financial goals. With that in mind, here’s how to make smarter choices and improve your current financial situation.
Less than one-third of Americans maintain a household budget, and only 30 percent have a long-term financial plan that takes savings and investment goals into account. Although establishing a budget and following it isn’t easy, it can help save you money in the long-run. Budgeting essentially assigns your money to a category and establishes specific spending limits for each category, allowing you to spend responsibility.
In order to start budgeting, download a free personal budgeting app like Mint or You Need a Budget. These apps allow users to input information about their debit, savings, and credit card accounts, and creates a user-friendly interface to reveal expenses. In addition, budgeting apps allow users to create categories and set limits for spending.
To budget effectively, download the app and spend regularly for the first month. After the first month, review your expenses and be as honest with yourself as possible. For most people, cutting down on eating out and entertainment can help save a few hundred each month.
Refinance your loans
If you’re in debt, refinancing your loans can help you secure a lower interest rate and help you pay off your loans sooner. Companies like Loans offers award-winning, low-rate home loans and help users through each step of the refinancing journey. In addition, they provide easy and quick applications to get the process started.
Whether you’re looking to refinance a home loan or student loan, you’ll need to refinance at an interest rate that is lower than the one on your current loan. Many student loans have around 7 percent interest, so it’s best to realistically aim for a refinance rate of 3–5 percent. Refinancing loans can help you make lower monthly payments and consolidate your current debt, ultimately making it easier for you to become debt-free.
Open a high-yield savings account
One 2017 survey found that 69 percent of Americans have less than $1,000 saved, while another survey found that 29 percent over the age of 55 have no retirement savings. Regardless of your age, it’s possible to catch up and start saving. To obtain the most return for your money, open a high-yield savings account and start saving a set amount per month, making sure to add this amount to your budget. While most investment management experts recommend saving 20–25 percent of your income per month, this can be unrealistic for some. Instead, aim to save somewhere between $500 and $1,000 each month. Depositing money as soon as you receive a paycheck can eliminate the temptation to spend it.
Opening a high-yield savings account will help you earn higher interest for deposits than a traditional savings account. Many traditional savings accounts offer .01 percent interest, while many high-yield savings accounts offer over 2 percent. Higher interest rates can net you a few extra hundred per year, and you’ll end up earning more if you have more in your account.
Although tackling your financial goals can seem impossible, taking these simple steps can help you make smarter decisions with your money. By budgeting, refinancing your loans, and opening a high-yield savings account, you’ll be able to hold yourself accountable for your expenses and save more money in the long run.